The Case for Shorter Windows
Shorter measurement windows react faster. An employee whose hours fall drops off coverage sooner, and one whose hours rise gets in sooner, at the cost of twice the administration.
The three things to know.
Faster Response
A six-month window re-tests every employee twice a year, so status follows hours more closely.
Twice the Work
Two measurement cycles, two administrative periods and two sets of notices mean more edge cases and more chances to miss a date.
A Constraint
The stability period for employees found full-time cannot be shorter than the measurement period, and has a six-month floor, so a six-month window pairs with a six-month stability period.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
A Six-Month Cycle
An employer uses two six-month windows, one ending April 30 and one ending October 31, with administrative periods through June and December.
What the Rule Produces
Employees’ status is refreshed twice a year, so an employee whose hours rise in the fall is covered from January instead of waiting a year. The employer runs two cycles of totals, notices and enrollment.
Four steps to apply it.
1. Pick the two windows
Set start and end dates for each cycle.
2. Calendar both cycles
Plan notices and enrollment for each.
3. Staff for it
Make sure payroll and HR can run it twice a year.
4. Review after a year
Compare cost and administration against a 12-month design.
Where it goes wrong. Underestimating the extra workload of running two cycles.
The questions that come up next.
Who should consider a short window?
Employers whose hours move quickly across seasons and who want coverage to track those moves.
Does a short window cost less?
It can reduce coverage for employees whose hours fall, but it adds administration and may raise churn in enrollment.
Is a three-month window ever sensible?
It is allowed, but it is hard to run well and produces frequent classification changes. Most employers avoid it.
Is a short window cheaper?
It can reduce coverage for employees whose hours fall, but it adds administration.
Does it help with seasonal staff?
It can, because status follows hours more closely, but seasonal new hires still use their initial period.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
Employees Found Not Full-Time
For employees found not full-time, the stability period cannot be longer than the measurement period.
The Seasonal Hire
A ski instructor hired November 15 into a position with customary annual employment of six months or less can be treated as seasonal and measured over an initial measurement period of up to 12 months.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
Talk it through with someone who runs this every year.
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